This article argues that FMCG manufacturers and grocery retailers need to review their approach to promotions to tackle declining volume sales, putting transparency at the centre of pricing. View Summary

This article argues that FMCG manufacturers and grocery retailers need to review their approach to promotions to tackle declining volume sales, putting transparency at the centre of pricing.

FMCG companies are struggling to find growth, as aggressive price promotions have failed to halt a decline in volume sales.

In the UK, shoppers have become wary of promotions as they shop little and often and switch to discount retailers.

Manufacturers and retailers need to take a new approach to promotions, making prices (before and after deals) more transparent, and looking at new types.

Although several brand equity measures have been proposed in the literature, a comparative assessment of their characteristics and performances is lacking. View Summary

Although several brand equity measures have been proposed in the literature, a comparative assessment of their characteristics and performances is lacking. This paper attempts to fill that gap. Combining survey data with real market data, it assesses two types of brand equity measure: customer mind-set measures (brand knowledge) and product-market performance measures (revenue premium). The results confirm that the customer mind-set measure captures cumulative brand-building effects better and offers diagnostic information. However, the revenue premium is found as a better choice for continuous tracking of brand equity because (a) it could reveal the true changes in brand equity; (b) it is a practical and convenient measure since its data requirements are readily available; and (c) it flags any change in brand-equity before the customer mind-set measure. Furthermore, the product-market performance measure is found to precede the customer mind-set. This study also conducts the first empirical test of the well-known brand value chain model on real market data. Finally, operationalising the customer mind-set measure on real market data for the first time, this study confirms that advertising and distribution are positively associated with brand-equity, while price promotion is negatively associated. By considering multiple measures, this study improves the robustness of the findings as well as addressing marketing accountability issues.

This event report reveals how Walmart, the retailer, is tapping big data to make more informed decisions and better engage customers. View Summary

This event report reveals how Walmart, the retailer, is tapping big data to make more informed decisions and better engage customers.

By working with a firm that specializes in tracking and forecasting the weather, Walmart has been able to show how demand changes with the climate, and plan accordingly.

Savings Catcher, a tool that compares the prices paid by customers against those of rival chains and automatically refunds the difference, points to the statistically-driven future.

Leveraging trends data from social media to highlight parts of its in-store assortment is helping keep Walmart's stores fresh and relevant.

8

Sharing and owning: The rise of the hybrid consumer

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Vincent Rousselet, Market Leader, Quarter 4, 2014

This article discusses the rise of the 'hybrid' consumer and explores the underlying trends that are driving this development. View Summary

This article discusses the rise of the 'hybrid' consumer and explores the underlying trends that are driving this development.

The emerging 'hybrid' consumers are happy to spend heavily on the latest Apple product but also to save money on their weekly shop by going to discounters such as Lidl and Aldi.

At the same time, the 'sharing economy' has seen a rise in enthusiasm for products and services available to rent, rather than to own.

This new consumer landscape, which combines previously separate behaviours such as embracing rental with ownership and luxury with austerity, calls for new kinds of segmentation.

9

Discounters will still thrive in the post-austerity era

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Melanie Howard, Market Leader, Quarter 4, 2014

This article analyses the prospects of discount retailers in the UK, arguing that despite economic recovery price-sensitivity will remain for the foreseeable future. View Summary

This article analyses the prospects of discount retailers in the UK, arguing that despite economic recovery price-sensitivity will remain for the foreseeable future.

Some argue that discounters will be squeezed out as they increase innovation and add layers of new price points.

But this looks unlikely as price-sensitivity is set to continue: only 5% of consumers say their spending will 'increase a lot' in the year ahead.

Greater numbers of people are set to shop online too - around 80% - piling pressure on bricks-and-mortar retailers to create an enthralling experience.

10

How your sense of fairness influences what you spend

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Rory Sutherland, Market Leader, Quarter 4, 2014

This article outlines the implications of research that analysed the utility people get from a purchase, and how this translates into perceived value of a product. View Summary

This article outlines the implications of research that analysed the utility people get from a purchase, and how this translates into perceived value of a product.

An experiment revealed that participants at the beach on an imagined holiday would be prepared to pay significantly more for a beer bought from a smart hotel bar than for an identical product from a beach vendor.

Consumers get two kinds of utility from a purchase, acquisition and transaction utility: some things are nicer to buy than they are to own; other things are nicer to own than they are to buy.

This kind of 'mental accounting' is vital in marketing, and many consumer behaviours only begin to make sense when this distinction has been understood.

11

Avoiding the ‘death spiral’: Why commanding a price premium is the best strategy for profitable growth

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Nigel Hollis, Warc Exclusive, July 2014

This article argues that over-reliance on price promotions kills profit and brands, and suggests some ways in which brands can build a premium price positioning. View Summary

This article argues that over-reliance on price promotions kills profit and brands, and suggests some ways in which brands can build a premium price positioning.

Over-reliance on price promotions creates a vicious cycle of declining margins, investment and innovation, and higher prices have a great impact on the bottom line than growth in volume sales.

To command a price premium brands should aim to be either best-in-class or appeal to a specific target audience, focussing on challenge, credibility and communication to be successful.

Examples are given of brands that have achieved a higher price point: Audi, the car manufacturer, which introduced a new range of cars including a flagship model and framed the brand as 'new luxury', and Bega, an Australian cheese brand, which featured local farmers and a 'real cheese' message to compete.

12

Trendwatch: Sympathetic pricing

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David Mattin, Admap, July/August 2014, pp. 8-8

This article explains how brands can use 'sympathetic pricing' - flexible pricing which ease lifestyle pain points - to show they care or build on shared values. View Summary

This article explains how brands can use 'sympathetic pricing' - flexible pricing which ease lifestyle pain points - to show they care or build on shared values.

Many brands want to show they 'care' about consumers, but people rarely believe them: sympathetic pricing is a way for brands to appear more credible.

Start-ups have an advantage in this area as they can establish flexible and dynamic pricing structures more quickly than legacy brands.

Examples of sympathetic pricing include Noosa International Resort in Australia giving hotel discounts during rainy stays and electronics brand BGH which offered Argentinian customers discounts based on the temperature of their apartment.

Other approaches build on shared values or beliefs, such as online platform Pressfolios which offered its service free to journalists recently made redundant, and Dutch airline Corendona's discount for people travelling to demonstrate for gay rights at the Sochi Winter Olympics.

13

Economic recovery: Is Britain in a post-traumatic state?

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Caroline Hayter, Market Leader, Quarter 3, 2014

This article uses lessons from psychology to understand the long term impact of the last economic crisis on British consumers' habits. View Summary

This article uses lessons from psychology to understand the long term impact of the last economic crisis on British consumers' habits.

The economic crisis can be looked at as a trauma for the collective psyche, with a long term impact on how people feel and behave, even though the cause is not always correctly attributed.

This manifests as anxiety around change and challenges to the status quo, creating a need for sensitive, trust-based marketing.

Related trends include shopping for deals, curated or guided choice, bargaining or haggling and an increased self-reliance for identity rather than close association with a single brand.

14

Retail promotions: Avoiding a promotions catastrophe

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Richard Moule, Market Leader, Quarter 3, 2014

This article discusses the looming crisis in UK supermarket trade promotions which are depressing sales volumes and margins. View Summary

This article discusses the looming crisis in UK supermarket trade promotions which are depressing sales volumes and margins.

Loyalty to brands and stores is at an all-time low because shoppers are deal-weary and see little difference between supermarkets.

Clear and simple promotions with a real perceived value still work effectively, including offers linked to fuel and round pound pricing.

Supermarket brands must also be clear about how consumers differentiate (or fail to differentiate) them from other stores.

15

Why being pragmatically political is the only way to grow brands in the digital age

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Charlie Ebdy, Admap, Commended, The Admap Prize, June 2014, pp. 40-42

This essay argues that in order to survive in the digital era brand must become pragmatically political. View Summary

This essay argues that in order to survive in the digital era brand must become pragmatically political. This follows massive cultural change which has followed the rise of digital communications and hurt the global middle classes. These groups of consumers are finding their jobs under threat and consuming power squashed, leading to changes in shopping behaviour and priorities. In order to survive brands should assume a social role that helps to protect the ability of consumers to keep buying their products. There are four ways in which brands can react to a reduction in consumer purchasing power: embrace communities, invest in customers, encourage better decisions and emphasise sustainability.

This event report discusses how Citi, the financial services provider, is serving growing consumer expectations surrounding digital banking. While convenience, epitomised by the proximity of a bricks-and-mortar branch, has traditionally been the key driver behind which bank customers choose, now the online and – increasingly – mobile services on offer are playing the central role. Citi has aimed to innovate in both these areas, such as by redesigning its app, and with its "Mobile Snapshot" tool, which allows enrolled users to view basic account details without logging in. The company has based its activity on detailed customer research, and believes this must be the priority in deciding which areas to prioritise going forward.

17

The most effective promotion: A comparative study across Latin American markets

This paper discusses the application of behavioural economics to branded product promotions in Latin America, with a view to understanding consumer choices and a more efficient allocation of marketing budgets. View Summary

This paper discusses the application of behavioural economics to branded product promotions in Latin America, with a view to understanding consumer choices and a more efficient allocation of marketing budgets. The available body of knowledge on promotion effectiveness is often incomplete, disaggregate, and sometimes anecdotal. In this research, a range of different types of product promotions such as price reduction, buy one get one free, loyalty rewards and more were systematically measured and compared across more than 20 promotions in five countries, in two CPG product categories. It was found that 'buy one get one free', and 'buy two get a third free' are the most effective promotions, and that free samples are also powerful.

18

From BOP to emerging middle classes in Latin America

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Sarah Boumphrey, ESOMAR, Latin America, Buenos Aires, April 2014

This paper examines the purchasing habits and priorities of low-income consumers in Latin America. This group represents an exciting target segment for many consumer goods companies - in Brazil alone there are 2.2 million households with a disposable income below US$2,500. View Summary

This paper examines the purchasing habits and priorities of low-income consumers in Latin America. This group represents an exciting target segment for many consumer goods companies - in Brazil alone there are 2.2 million households with a disposable income below US$2,500. In order to reach these consumers, businesses must first of all understand who they are and what they want, alongside the transition to emerging middle classes. The key to success is to learn from the experiences of other companies operating successfully both in the region and globally. Companies must understand the price/quality trade-off made by lower income consumers daily, and how this differs from decisions made by middle class consumers. When building brand awareness in Latin America, brands should consider the importance of word of mouth recommendation and tailoring products to the local market. It is also important for brands to not approach Latin America as a single market, as there is variation in attitudes, priorities and purchasing power in different countries.

This paper explains what is driving brand growth and inspiring manufacturers and retailers towards profitable business in the FMCG sector, presenting findings from a study of brands across 70 categories in Europe. View Summary

This paper explains what is driving brand growth and inspiring manufacturers and retailers towards profitable business in the FMCG sector, presenting findings from a study of brands across 70 categories in Europe. Drivers of growth and causes of decline over the past five years are explained in the context of economic recession, with comparisons of European markets with the US and emerging markets. Whilst FMCG value has continued to grow, consumers have 'traded down' from brands to private label. There is concern that people who switched to private label purchasing due to financial constraints, may not go back to brands, making brand loyalty an important marketing challenge. However, this situation has also enabled some brands to grow, as it has provided an opportunity to create stronger bonds with core consumers. In each market the top three national brands have achieved strongest growth (+10%), as a result of penetration and adapting to changing consumer needs.

20

Family Dollar solves the value equation: Quality, social recommendation and local understanding

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Stephen Whiteside, Event Reports, IRI Summit, March 2014

This event report explains how for Family Dollar, the US discount retailer, 'value' is more about quality and experience than price. View Summary

This event report explains how for Family Dollar, the US discount retailer, 'value' is more about quality and experience than price. Despite a low-income customer profile, research has found that Family Dollar's customers focus on product quality and reliability in purchasing decisions as they cannot afford to take a risk on products that may not work. These consumers also value a personal touch when shopping, such as being known by name in stores they visit regularly. Word of mouth is an important focus for the company's marketing efforts as customers increasingly rely on recommendation, especially through social media: around 45% of Family Dollar customers rely on feedback from friends and family for even low-cost purchases.

This article discusses managerial bias towards cost efficiency and the harm this can have for corporate performance. View Summary

This article discusses managerial bias towards cost efficiency and the harm this can have for corporate performance. The results of a study of 25,000 US companies over 40 years are explained, which found that of those that employed cost leadership strategies, only a few achieved sustained success. Part of the reason for this is that focussing on costs can make the business inward looking and treating suppliers as a cost to be cut can damage relationship building. Instead, companies should look at how they can adopt a more premium positioning, improve margins without cutting costs, and consider how they can pursue success in a bolder way.

22

Behavioural economics: Nudge them into switching

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Colin Strong, Admap, March 2014, pp. 14-16

This article describes how behavioural science can be used to overcome brand loyalty and nudge consumers into switching. View Summary

This article describes how behavioural science can be used to overcome brand loyalty and nudge consumers into switching. Even though consumers can save money by switching, few do in many categories. There are several key commercial considerations in this: hyperbolic discounting, where potential discounts are less salient to the consumer; regret aversion, where people fear making the wrong choice; and loss aversion, where people fear losing money (this can also stimulate switching). Data collection capabilities can be used by companies to enhance their customer service, allowing consumers to compare their circumstances to others, and get the best deal. Developments in this area may be particularly useful in low-churn categories.

23

New ways to understand consumers: Insights from the MRS Creativity Lab

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Lena Roland, Event Reports, MRS Creativity Lab, January 2014

This event report discusses how science and psychology can be used in innovative ways to generate consumer insights and drive sales. View Summary

This event report discusses how science and psychology can be used in innovative ways to generate consumer insights and drive sales. Understanding that natural cognitive processes encourage humans to fall back on the familiar promises to help marketers and researchers overcome inertia in their thinking and procedures. Gathering insights based on the interaction of the senses is another way of understanding shoppers in a more fulsome and innovative way. Different pricing strategies based on human psychology - from leveraging the "goldilocks effect" to "hyperbolic discounting" - also play into the shoppers' instinct to try and get the best and safest deal.

24

Closing the price gap: Retailers, brands and the future of private-label food

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Tim Eales, Warc Exclusive, IRI, January 2014

This article examines the enduring role that private or own label ranges can play for European retailers and manufacturers, following a rise in popularity during the economic downturn. View Summary

This article examines the enduring role that private or own label ranges can play for European retailers and manufacturers, following a rise in popularity during the economic downturn. During this period, retailers have managed to persuade shoppers, especially in the UK and Germany (but not in France), that private label products can provide quality as well as value. They have gained their own brand personalities, and by focusing less on low prices, have reduced the price gap between private label and national brands, which have seen promotional strategies increase. However, this has led to consumers beginning to find some retailers' propositions confusing, particularly in the case of the mid-ground supermarkets that try to appeal to every shopper. Introducing own label products in these supermarkets may jeopardise loyalty and it will be essential to differentiate from other private label brands. Equally, national brands must focus on innovation to differentiate from all private label ranges and justify their price premium.

This report discusses the growth in private label brands, identifying types of products and market drivers, and giving an overview of private label penetration globally. Market drivers include development of products, the economic downturn, changes in retail infrastructure, and consumers' search for value. Private label brands have had little impact so far in emerging markets, but this is predicted to change as retail networks consolidate.